Mitel turns profit for Q3; plans to sell DataNet/CommSource unit

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Canadian unified communications vendor Mitel Networks (Nasdaq: MITL), which in the second quarter booked a net loss that it blamed primarily on costs associated with its accelerated restructuring, said those costs lowered in the third quarter, allowing it to swing to a modest profit.

Mitel reported net income of $4.6 million, or 8 cents per share, compared to a net loss of $4 million, or $8 cents per share in the like quarter a year ago. Non-GAAP net income for the third quarter was $12.4 million, or 22 cents per share, up from $8.6 million, or 15 cents per share, a year ago. Analysts expected the company to report earnings of 21 cents per share.

Third quarter revenues were $150.5 million, up from $143.9 million in the previous year quarter. Those numbers didn't include $13.9 million in revenue from DataNet/CommSource, a business unit Mitel plans to divest. Analysts, including the DataNet data, forecast revenues of $167.43 million for the quarter.

There was a disconnect between Mitel and analysts forecasting fourth quarter revenues as well, again because Mitel excluded DataNet revenues and analysts did not. The company said it expects fourth quarter fiscal 2012 revenue to come in between $152 million and $157 million, compared to analysts' expectations (including DataNet) of $173.66 million for the quarter. A year ago, Mitel reportyed revenues of $152.2 million for the fourth quarter.

Mitel traded at $3.46 at midday Monday. Over the past 52 weeks, it has traded in a range of $1.92 to $5.74.

Mitel in December, on the heels of an upbeat second-quarter earnings report, announced it was strengthening its North American channel program, instituting a series of strategic initiatives including adding new execs, a change in the way it supports some of its products, and a refocusing that will set its partners up as the primary sales channel for the company.

The moves, said the unified communications and collaboration specialist, reflect its ongoing strategic efforts "to evolve into a laser-focused channel sales organization."

That decision, said CFO Steve Spooner, has helped the company bump its average U.S. sale to $250,000, up from $40,000 a year ago.

"When you have a more sophisticated sales organization, and when you bring on more sophisticated sales partners, they tend to go after the larger sales," said Spooner. "Some of the more sophisticated customers who want to buy the software applications (also) appreciate ... the virtualization solution, in which we have significant leadership today."

Mitel does about 60 percent of its business in the U.S.

The company last week announced plans to sell DataNet/CommSource, saying it no longer fit Mitel's business plans.

Mitel remains a work in progress. Its average sales still haven't caught up to where they were three years ago, and it's still trailing Cisco (Nasdaq: CSCO) and Avaya in it is segment.

For more:
- see this release
- see this Ottawa Business Journal article

Special Report: Enterprise Communications earnings in the fourth quarter 2011

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